FERMA highlights importance of risk-sharing

Optimal risk-sharing is fundamental to a successful transition to carbon neutrality, protecting our organisations and our societies against extreme risks in the face of climate change, and in the battle against cyber-crime, the President of the Federation of European Risk Managers (FERMA), Dirk Wegener, said at the start of the FERMA Forum in Copenhagen.

The 2022 Forum is the first time the Forum has been held in person since 2019 because of the pandemic. According to the organisers the event has attracted 1,862 risk managers and other risk professionals from across Europe.

In his remarks, Wegener brought together three areas of concern for risk managers: the transition to carbon neutrality, systemic risks and cyber risks and how a protection gap was threatening optimal risk sharing.

According to Wegener for many risk managers the pandemic allowed them to demonstrate their capabilities and the value of risk management for organisations in a crisis.

They showed that enterprise risk management enabled businesses to remain resilient and in business. “In a time of such great uncertainty, it was satisfying for risk managers to put their skills to use to support their companies and their colleagues,” he said. “It is not so surprising 90% said the pandemic had made risk management more important to their organisation.”

However, he also stated that the pandemic had been an uncomfortable time for insurance managers who had had the duty of explaining to their boards why certain risks such as non-damage business interruption were not covered.

Since then, the market has reacted by tightening wordings, for example, to specifically exclude claims resulting from infectious diseases. Overall, the hard market continues to limit risk transfer capacity and keep up prices.

He said: “We see growing concern from insurance managers about a protection gap.  In the FERMA 2022 Risk Manager Survey, 41% of the respondents said they believe that some of their company’s activities or locations will become uninsurable in the future. This finding illustrates our concern about exposures from all risks that can be seen systemic, such natural disasters resulting from climate change.”